Value Engineering

Value Engineering is a method by which the parties may utilize alternative methods of construction or products to achieve the project goal at a lesser cost without sacrificing the integrity of the project. A cost-saving measure is sometimes used as an incentive to the contractor. If he/she can suggest a successful alternative and save resources, they may receive a credit of a portion of the amount saved by the Owner. However, in that situation, the contract documents may require that the contractor accepts the liability for the value engineering decision if there is any liability. In order to facilitate effective value engineering on the project, it is best to utilize formal processes seeking the approval of all project participants including the end user, if possible, so that everyone shares equally in the decision. Value engineering is best done early in the process.

Standard AIA documents do not provide standard clauses that specifically address value engineering and this is sometimes done on government contracts. Where value engineering is anticipated to be used as part of the project delivery method, the value engineering procedure should be set forth in the contract and should set forth the party that is responsible for the value engineered item.

When the contractor has a value engineering proposal, the contractor may submit the proposal to the owner and architect. AIA A201 § 3.4.2 allows the contractor to make substitutions, but only with the consent of the owner, after evaluation by the architect, and in accordance with a change order. AIA B141 § 2.6.5.2 provides that the architect "shall review properly prepared, timely requests by the Owner or Contractor for changes in the Work." Under B141 § 2.8.2.6, the architect is entitled to a change in contract price and time for "evaluation of substitutions proposed by the Owner's consultants or contractors and making subsequent revisions to Instruments of Service resulting therefrom." Thus, a general framework is in place, but does not adequately address the allocation of risk involved in value engineering proposals from a contractor.

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